© 2002, Gallagher & Dawsey Co., LPA
Nowadays, virtually everything is insurable. Therefore, it should be
no surprise that insurance can be purchased to protect intellectual
property. Intellectual property insurance can cover any number of the
many risks inherent in today's knowledge based economy. Insurance
covering the risks associated with intellectual property is now
affordable to businesses of all sizes and is as important as property
and casualty insurance.
The number of intellectual property claims filed involving
infringement of patent, trademark, and copyright rights, and their
associated costs, have skyrocketed in the last decade. Recently, the
American Intellectual Property Law Association indicated that the
average cost to litigate a patent infringement suit is in excess of $1
Historically, advertising policy riders to a company's general
liability insurance coverage provided limited coverage for trademark,
trade dress, and copyright infringement. This left companies exposed
to claims based on patents and trade secrets. Today, most suits
arising from intellectual property infringement are specifically
excluded from general liability insurance policies.
To overcome the limitations of most modern policies, insurance
companies have developed a wide range of intellectual property
specific insurance, with an emphasis on patent infringement claims.
Generally, there are three basic patent infringement policy types:
Defense Only, Defense & Indemnity, and Offensive.
Defense Only policies usually cover only the cost to defend an
infringement suit. They to not cover any damages that may be awarded.
This type of coverage is best suited for companies with annual
revenues in the range of $1/2 million to $25 million and have annual
policy premiums in the range from $2,500 to $3,500.
Defense and Indemnity policies generally provide defense coverage in
the event of a patent infringement suit AND will pay damages if
liability is determined. These policies are generally designed for
larger companies with annual revenues in excess of $50 million. Annual
premiums for defense and indemnity policies can range between $3,000
Offensive policies are designed to reimburse the insured for legal
expenses associated with pursuing an infringing party. Offensive
policies are written in standard limits that range from $100,000 to
$500,000. A $100,000 policy will have an annual premium of
approximately $1,000. An additional benefit of offensive policies is
that companies often are more aggressive in pursuing potential
infringers when covered by an offensive policy.
An endless variety of additional "riders" may be added to the basic
intellectual property insurance policy. Such riders include coverage
for loss of business income, loss of ongoing royalties and license
fees, loss of R&D benefits, loss of IP portfolio value, loss of trade
dress identity, loss of trade secret advantage, and cost of redesign.
Perhaps most importantly, intellectual property insurance can serve as
the basis for including intellectual property on the balance sheet as
an asset that can be valued at the insured value.
Intellectual property insurance is an excellent way to protect your
business from the very real possibility of IP related lawsuits.